Why Over-The-Top TV Apps Will Win

Every time I hear predictions that over-the-top video delivery will overtake traditional pay-TV, I think, “maybe, but it’s gonna take a while.” After all, most people I know are augmenting their TV subscription packages watching with OTT, but few have cut it out altogether.

But my thinking changes altogether when it comes to TV apps. As I write in my weekly analysis for GigaOM Pro, this is where where I think OTT will rule sooner rather than later.

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Over-The-Top TV Apps?

With video, anything delivered over the Internet but not as a part of the carrier’s own video service (but on the public Internet) is defined as Over-The-Top. Netflix Watch Instantly (s nflx) and Hulu are good examples.

TV Apps can be thought of the same way. In the U.S., carriers have their own interactive services and applications framework called OCAP. OCAP is Java-based middleware for applications within Tru2Way, and it’s been gestating for over a decade with little to show for it. While there have been some small successes, and a watered-down version called EBIF is available on many lower-powered set-tops, efforts by the carriers to roll out and actually use OCAP have been half-hearted at best.

OTT app frameworks are, on the other hand, set to explode. With the announcement of Google TV (s goog) and the imminent arrival of a revamped Apple (s aapl) living room box, the TV apps in the living room will mostly likely be dominated by the OTT variety, and here’s why:

Carriers are lumbering dinosaurs. Sure, they’re extremely cash-rich and powerful dinosaurs, but they’ve not shown any sign in the past 15 years that they can figure out how to build the necessary underpinnings required for the rollout of a dynamic and thriving market for interactive applications.

Mobile proved the use-case for OTT Apps for TV. If there’s another industry that appeared as locked down as — or more than– pay-TV in the U.S., it’s the U.S. mobile industry. Apple, and later Google, cracked that market open pretty quickly, and with pay-TV, the big non-carrier OTT players (again, Apple and Google) don’t even have to jump in bed with the carriers (unlike they had to with mobile).

Innovative developers will gravitate to the faster-to-market platforms. Sure, there might be some companies developing TV apps for OCAP, but I guarantee there are exponentially more developers developing for iPhone, iPad, and Android, and by expanding to the TV screen, Apple and Google just gave them a whole new market.

The bottom line is: The cable industry’s approach to interactive applications and services is rooted in the late 90s and early 2000s when OCAP was born. The pace of innovation has been such that over the past decade – while the lumbering dinosaurs were nearly exclusively focused on the digital transition and HD upgrades – that the standards were outdated before they were completely rolled out. And now, Apple and Google (not to mention Boxee and other upstarts) are coming in “over-the-top.”

At Are You Watching This?! we’ve been waiting years for technology like Google TV. I use “glaciers” when describing MSOs, but “lumbering” works too. There’s going to be an explosion of apps (people need to stop thinking eBay, Flickr, Twitter, et al) that will set these platforms apart from the failed attempts in the past.

Great post, but I wonder where the mobile media push has really taken us. I still don’t believe mobiles and the current crop of pads/smartphones are where people want to watch anything more, or longer than funny Youtube clips.

Long-form still demands the viewer is comfortable, and wants to absorb content rather than physically engage to participate in the medium. Or is long-form dead? I don’t think so.

What I see is – the rollout of 3G and 4G networks has educated the manufacturers, carriers and providers on how to get the content from the source to the user. Now we have to apply that in an intelligent way.

Australia’s proposed national broadband project is a great example with dinosaurs and techno-luddites designing the next generation delivery platform for all digital content.

What they should be thinking is fat-fibre to the street corner, and broadband micro-cells for the last 100 metres, servicing , both ‘fixed’ and mobile phone and data services without the expense of the ‘last mile’ – while providing seamless integration of all comms into a single v6 IP per connection.

Great post. One thing that nobody seems to be talking about but is something that I believe is critical is the amount of quality content that is going to be available over the top. Right now, you are seeing a rush by content producers to put alot of content online, to start to push the envelope on that end knowing that they need to be there. However, I believe that once the connection of the home tv to the internet becomes a reality for a large number of users, I think many pro content producers are going to pull back at the urging of cable companies and only offer clips and other short form content directly to users. I believe that there will be a limited number of players that have access to high quality content- Netflix, cable companies, Hulu (maybe), large studios and networks themselves, Youtube–really only the players that can either pay big $ for the content or those who already own the content. I really think the likes of Boxee and Clicker may have a hard time building a long term sustainable business since in a few years they are going to have a hard time getting access to long form professional grade content. Nevertheless, they could be acquired by one of the majors that want to utilize the interface that they have so quickly built. So that is not to say that they won’t be monetarily successful. I am just saying that I don’t think they will be around in 5 years as they may be envisioning.

@Paul – I agree, the OTT video players will see increasing challenges, and possibly moves to negate their efforts by the big players. Netflix’s big Epix deal was an effort by them to go-big and lock in some content as they see more pressure from the big multi-channel operators.

On the app-front, it seems the operators are going to continuously be behind, and with apps there are not nearly the same amount of big content deals to pressure the smaller, nimbler over-the-top players. OTT Apps is, in my opinion, nearly a wide-open greenfield opportunity, unlike video.